NCPA - National Center for Policy Analysis


February 9, 2005

Medicare's new prescription drug program will cost taxpayers $720 billion over its first 10 years, with costs reaching $100 billion a year by the middle of the next decade, according to a new estimate by the Bush administration.

The new number is far higher than any previous estimate produced by the administration or Congress, but it reflects what lawmakers and health care analysts have known all along: As baby boomers turn 65 and swell Medicare's rolls, the government's tab for their health care is expected to rise substantially.

  • Based on the numbers released Tuesday, the program's costs are estimated at roughly $100 billion annually in 2014 and 2015, or more than a third of what the Medicare bill originally was projected to cost for the entire first 10 years, ending in 2013.
  • Under the new program, participants will pay monthly premiums that are expected to average $35 in 2006 and the first $250 in drug costs.
  • Medicare will pick up 75 percent of the next $2,000 in prescription expenses.
  • After that, a gap is built into coverage during which participants are responsible for the entire drug bills until costs top $5,100, after which the government pays 95 percent.

The new projection issued Tuesday runs from 2006 to 2015 and is not directly comparable to the $400 billion estimate lawmakers had when they narrowly approved Medicare legislation in 2003 or to the revised estimate of $534 billion that the White House issued just two months later, after the law was enacted.

Those figures covered the 10 years from 2004 to 2013 -- two years to devise the drug benefit and put it in place and eight years in which the government would pay some drug costs for Medicare beneficiaries.

Source: Associated Press, "Medicare drug aid to cost $720B 1st decade," USA Today, February 9, 2005.

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